Oregon’s
Public Employees Retirement System (PERS) is in a crisis that will, if
extreme measures are not taken, destroy the faith and credit of Oregon’s
State Government.

Misinformation
has been the way with PERS. No one knows the truth because of deliberate
deceit and, for the most part, ignorance. This includes our Oregon Congressmen,
City Councils, Commissioners, and 99% of the people involved in this Grand
Delusion; but that is about to change with this article.

PERS
is destroying your future and will drive the middle class into poverty
unless it is shut down. Over 50 years ago, Hayek understood how Collectivism
operated and logically stated:

“If
all sources of current information are effectively under One Single Control,
it is no longer a question of merely persuading the people of this or
that. The skilful propagandist then has power to mold their minds in any
direction he chooses, and even the most intelligent and independent people
cannot entirely escape that influence if they are long isolated from all
other sources of information.”

“The
moral consequences of Totalitarian Propaganda are even of a more profound
kind. They are destructive of all morals because they undermine one of
the foundations of all morals: the Sense and the Respect for Truth.”[1]

What
follows is a truthful, factual documentation regarding PERS and your future.

HISTORICAL
PERSPECTIVE

Basis
Historical Economics, PERS is under the category of “Fraud” and is properly
classified as a Swindling Scheme.[2] It meets three necessary qualifications:

1. It is
a violation of the Public Trust (due to deceit and chicanery) 2. It is a credit scheme based on leverage (Borrowing on credit,
with the taxpayer as the guarantor, to make money) 3. It uses a standard of measurement that is contrived and fictional.
In other words, its solvency, now and in the future, is a delusion.

Historically,
Swindling Schemes are typically born from prosperity. But in this case,
it was born from both prosperity and excessive credit creation by the
Federal Reserve. Since 1980, U.S. household wealth, driven by easy money
and credit, has risen from $7 Trillion to $49.8 Trillion in 2004. Our
nation’s debt now totals 325 percent of our gross domestic product; which
is the greatest debt in our history.[3]

This
easy credit led people to believe making lots of money was easy, of which
PERS took advantage of to increase its retirement benefits from 61.8 percent
in 1988 to 106 percent in 2000 by further leveraging their assets while
neglecting the reserve requirements; the Classic Swindling Scheme.

History
clearly demonstrates that Swindling Schemes based on credit creation have
great uniformity and follow a very specific schematic:

1. Deceive
the public through lies and misinformation 2. Leverage your assets to make more money in the short term
3. When it collapses, spread the blame onto other people and
exogenous conditions. (Avoiding any Accountability or Responsibility)
4. Borrow money or issue bonds to extend the fraud. 5. Flee with the money to another state or country when the scheme
finally implodes and collapses.

Recently
Oregon has completed Step 4 and we are now awaiting Step 5.

COMPARISON
of other STATES

Let’s
uncover the misinformation of PERS and look at some important facts, which
have not been in the marketplace, to grasp the True Reality of the PERS
system.

For
instance: How does an Oregon PERS Pension compare with other States? Let’s
use one sample for comparison. Assume a K-12 teacher who works 30 years
and retires with a final salary of $50,000. What would be their single
life annuity payout? What was their contribution rate? Do they also receive
Social Security?

Washington: $30,000.
Contribution rate: 6%. Social Security: Yes.

Idaho: $30,000.
Contribution rate: 5.86%. Social Security: Yes.

Nevada: $37,500.
Contribution rate: 9.75%. Social Security: No.

California: $33,000.
Contribution rate: 8%. Social Security: No.

Arizona: $34,500.
Contribution rate: 5.7%. Social Security: Yes.

Oregon: $53,000.
Contribution rate: 0.00%. Social Security: Yes.[4]

Assuming
$18,000 for Social Security, Oregon is 215% more than California, 189%
more than Nevada, 77% more than Washington and Idaho and 53.6% more than
Arizona. In addition, the contribution rate for Oregon is ZERO, and CA
and Nevada receive ZERO Social Security.

As a
consequence of PERS, it costs a minimum of $13 million to $15 million
more per year to run the Springfield School District as compared to the
same size school district in other Western states.[5]

In addition,
Employee Benefit Research Institute concluded that State and Local Governments
wage and salary costs are 40% higher and its’ benefits are 60% higher
than the private sector.[6]

In spite
of these facts, they continually tell the citizens in the private sector
that they need more money. Deception and lying is a way of life with these
people.

CAPITAL
REQUIREMENTS

How
much savings/capital is needed to fund a single life annuity for $53,000
(106% of $50,000) in the private sector, for a male, at the age of 58?
The answer: $873,000.00. How much does Oregon PERS say they need? The
answer: $563,368.00. This is a difference of over $300,000. Do they have
that money? Absolutely NOT: Not today and Not in the past; tax, borrow,
tax, borrow, etc..[7]

Now
you know why PERS almost folded during the stock market decline. Some
say, that it is a fully funded Pension: WRONG. If it was fully funded,
then they wouldn’t have to increase the employer contribution rate or
sell pension bonds. (For example: The contribution rate for PERS for the
Springfield School district started at 12% and will soon be 28%; the Springfield
Police contribution is 47.2%; can it go to 100% ? The answer is yes on
both entities.[8]

Since
the taxpayers voted down raising taxes, the State back-doored the funding
for PERS by more than DOUBLING Oregon’s bond indebtedness, from $674 per
capita in 2003 to $1,367 per capita for 2005.[9]

The
PERS debt obligation for each citizen is now $575 per year for 20 years.
That amounts to a loss of capital of: $21,151.92 for each citizen, $84,607.80
for a family of four, and 76 BILLION, 677 MILLION, 933 THOUSAND, 945 DOLLARS
for the entire population. This is being done to partially FUND A PERS
PENSION.

Why
didn’t your Lane Commissioner, City Council, State Representative, School
District, or any other Government official tell you this? I suggest you
contact these people and ask them.

WHAT
CAN BE GUARANTEED?

PERS
will tell you that the 8% return per year is guaranteed. That is a half-truth
at best. They not only guarantee an 8% return (The private market rate
is at 4 – 6 %), but they also guarantee a 2% Cost of Living, exclusion
from paying State Income Taxes, Medical Benefits, and no Administrative
or Insurance costs.[10] This means, in reality, an annuity rate of 11%
to 16% and sometimes higher.

Is the
8% return valid? Yes. Actuaries use a 50-year time horizon, and for that
time period it is valid. But it is not valid for 80 years, 100 years,
or 200 years. This is called curve fitting; more commonly, it is known
as cheating. (Making the data fit the premise)[11]

As a
general rule, people have short memories, and tend to let the recent past
become the norm. For example, in 1966, the Dow was 1,000, and by 1982,
the Dow was below 800. That is a decline of 20 percent in 16 years. Can
Oregon continue to pay an 11% – 16% annuity, survive that market return,
without raising taxes or passing new bond measures?

Let’s
also keep in mind that Long-Term Capital Management which began in 1994
by a group of Ph.D.’s and Noble Prize Economists, leveraged their account,
betting on regression to the mean and then went bankrupt in 1998. They
were bailed out by the Federal Government. The defined benefit pension
in the private sector is another disaster sponsored by FALSE ASSUMPTIONS;
so much for the experts and their theories.

COMPARISON
TO THE PRIVATE SECTOR

How
does PERS compare with the private sector? The Median (typical) Household
in the USA has a net worth of less than $15,000, excluding home equity.
The top 20% of Americans have a median net worth, excluding home equity,
of less than $60,000. The median value of retirement accounts by workers
from ages 55 – 64 was $55,000 in 2001, and only 11% of all Americans have
a retirement savings of $250,000 or more.[12]

Millionaires
represent 3.5% of the population, but only 2.8% are first generation.
That means that a 30 year PERS employee with the highest salary of only
$50,000 will receive a pension that requires a minimum of One Million
to fund in the private sector; the top 2.8% of all the citizens in the
USA.[13]

What
is even more important to know is that when this leveraged investment
account loses money, YOU, the citizen, are responsible to make up the
difference. That is the reason the Police, Schools, County, and other
Government Agencies are constantly asking for more money; to make up the
losses from the investment account.

In the
moral sense, PERS is an act of complete irresponsibility; shifting the
risk and the debt burden for their retirement off to their friends, neighbors,
our children, and grandchildren — this is so they can live a life of perpetual
childhood.

YOUR
FUTURE

So,
what does the future hold for every Oregonian? According to the Oregon
State Debt Policy Advisory Commission: “The State’s Debt burden has increased
significantly (103%) in the last few years and this trend is expected
to continue during the current and next several biennia.”[12]

In other
words, PERS will need continued funding (The Reality) through bond indebtedness
and new taxes; this cycle of perpetual debt will eventually grind the
middle class into poverty.

In the
larger picture, PERS is a harbinger for the USA; Oregon like the USA is
living on credit. Historically speaking, no nation or empire in the history
of the world has ever taken on this level of debt and not had a financial
crisis. In fact, throughout history, all great empires, towards the end,
suffer a sharply depreciating currency, rising interest rates and accelerating
inflation; it is only a matter of time when all three will be in force.
That is economic history and those market forces are on the horizon.

Subscribe to NewsWithViews Daily Email Alerts

Email Address *

First Name

*required
field

In conclusion,
Oregon is a theatre of the absurd. The Oregon Supreme Court actually believes
it can ignore all historical precedence and order the tides to recede
— which it is free to do; the tides won’t mind, but it won’t stop the
iron laws of economics.

Unless
the Court and the citizens can understand that PERS is a Swindling Scheme
and a Criminal Action, then your future is to live in poverty as an indentured
servant to public employees.

Sources:

1. "Manias, Panics, and Crashes: A History of Financial Crises,"
Charles P. Kindleberger, 2000;2. "Extraordinary Popular Delusions and the Madness of Crowds,"
Charles Mackay, 1841; 3. "Can 'IT' Happen Again: Essays on Instability and Finance,"
Hyman Minsky; 4. "The Remarkable Story of Risk," Peter Bernstein;5. "Tomorrow's Gold, Asia's Age of Discovery," Marc Faber; 6. Alan Stonewall, PERS Report 2000, Empire of Debt, The Millionaire
Next Door, Running on Empty/Peter Peterson, The Law of Civilization and
Decay/Brooks Adams, Decline of the West/Oswald Spengler, Tragedy and Hope/Quigley;
and others.

Fred
M. Starkey is a former Lead Long-Term Analyst for Shearson Lehman and
American Express out of NYC. After turning down a lead analyst position
with Merrill Lynch and Pru Bache/NYC, he was recruited by Stoltler and
Company and moved to Oregon. He is now a private consultant to many firms
involved in commodities and those involved in trading and investing: Banks,
S&L’s, Mortgage Companies, Grain Elevators, Cotton Mills, Growers,
Merchants, Duck Farms, Soybean Crushers, Bullion Buyers, and much more.
His financial acumen and 12 years of research into PERS have revealed
the real truth behind what he calls Oregon State’s “PERS Ponzi.”
A long-term resident of Springfield, Oregon, Fred has been married 43
years and is the father of six.